Oppenheimer upgraded its investment recommendation on shares of Mattel (MAT) to neutral from sell.
Analyst Linda Bolton Weiser says the company's first quarter loss per share of 7 cents (which excludes 15 cents of tax benefits but includes 3 cents of severance expenses) compares with her estimate and the Wall Street consensus of 1 cent EPS. She maintains her low-on-Street $1.11 2006 EPS estimate, but raised her $1.16 2007 EPS forecast to $1.22. She notes even with only modest 2% sales growth projected, she believes Mattel can report 10% EPS growth in 2007, driven by flattening out of gross margin after years of decline, continuing initiatives to modestly reduce SG&A expense, and share repurchases. She says the stock's fair value is $17, warranting a neutral rating.